Project finance in practice : case studies

283 Pages·2014·1.786 MB·English

by  Jackdon, Chris, Nahlik, Carmel F. de

Project Finance in Practice
Case Studies
i

Project Finance in Practice
Case Studies
Carmel de Nahlik and Chris Jackson
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Published by
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Contents
Acknowledgements xi
About the authors xiii
Part 1 Project finance principles in practice 1
1 Introduction 3
2 A brief history of project finance 6
Overview 6
How were large projects financed in the past? 6
Islamic finance and its contribution towards project finance forms 10
Mudarabah 12
Musharakah 12
Murabaha 12
Salam and istisna’a 13
Ijarah 13
Sukuk 13
What today’s project financier can learn from history 14
3 Principles of project finance 15
Overview 15
What makes a project a project? 15
Cash flow or profit? 18
Are assets always valuable as security? 19
4 Different contexts for project finance approaches 20
Overview 20
Fish farming 20
Film finance 20
Computer gaming 21
Hotel financing 22
Start-ups 22
How governments have stolen the project finance ball 23
Project finance in smaller and less conventional transactions 26
Small agriculture projects 26
Small renewable energy ventures 27
Small creative projects 28
5 Impact of regulation 29
Overview 29
v
Contents
Banking from the 1960s to the late 1980s 29
Capital adequacy 30
Taxation 32
Environmental 34
Self regulatory organisations and independent bodies 35
Corporate governance 35
What next for regulation? 36
6 Risk mitigation in project finance 38
Overview 38
Credit analysis, monitoring and control 38
Technology 40
Hedging 41
Insurance 43
Credit Enhancement 45
Full or partial guarantees 45
Contingent credit support 46
7 Project management meets project finance 48
Overview 48
Principles of project management 48
Scope 49
Cost 51
What does it really cost? 51
Time 52
Key issues for the project management of the project 54
How project management has professionalised 56
Computer models 57
Lessons for project financiers from project management for best practice 59
Part 2 Case studies I: mature projects 61
8 How LASMO rode the waves and struck black 65
Why is this case interesting? 65
What was the project? 65
Macro environment 71
History of the project’s development 77
The Ninian Field 79
Sponsors 81
Structure 82
Financing decisions 83
The debt decision 83
An equity facet? 84
Investor profiles 85
vi
Contents
The sting in the tail 86
Lessons learned 88
9 Skynet – the private finance initiative boldly goes into space 91
Why is this case interesting? 91
Key project features 91
What was the project? 92
Macro environment 93
History of the project’s development 95
Sponsors 98
Structure 99
Financing decisions 101
Lessons learned 103
10 MTN (Nigeria) calling 105
Why is this case interesting? 105
What was the project? 106
Macro environment 112
History of the project’s development 116
Sponsors 117
Structure 117
Financing decisions 122
Investor profiles 125
Lessons learned 126
11 Liverpool manage to ‘walk on’ with a change of sponsor 131
Why is this case interesting? 131
What was the project? 132
Macro environment 135
History of the project’s development 140
Sponsors 142
Structure 143
Financing decisions 146
Lessons learned 147
12 When the NHS Foundation Trust becomes the patient in its new hospital 151
Why is this case interesting? 151
What was the project? 152
Macro environment 155
History of the project’s development 157
Sponsors 159
Structure 160
Financing decisions 162
Lessons learned 168
vii
Contents
13 A-Model to follow? 172
Why is this case interesting? 172
What was the project? 173
The A-model and toll revenues 174
Macro environment 178
History of the project’s development 179
Germany’s most dangerous road 181
The interplay of public private partnerships and public procurement 181
Sponsors 181
Structure 182
Financing decisions 183
The A-models following the A1 184
Lessons learned 186
Part 3 Case studies II: projects in progress 189
14 Up, up and away: a Chinese aircraft leasing case 193
Why is this case interesting? 193
What is the project? 193
Macro environment 194
Global industry environment 194
China 194
Jet fuel price effects 195
Aircraft leasing in China 196
History of the project’s development 197
Financing decisions 199
Lessons learned 202
15 How Desert Hot Springs stayed cool – CPV’s Sentinel Standby Power Project 204
Why is this case interesting? 204
What is the project? 205
Macro environment 208
Electricity 208
California and the project locale 209
History of the project’s development 211
Sponsors 212
Structure 213
Financing decisions 215
Investor profiles 215
Lessons learned 217
16 Sadara: a large complex cracker! 218
Why is this case interesting? 218
What is the project? 218
viii
Contents
Macro environment 219
History of the project’s development 222
Sponsors 225
Structure 225
Financing decisions 229
Investor profiles 230
Lessons learned 231
17 Pret-a-Port privatisation: opportunities for project finance? 233
Why are these cases interesting? 233
Key project features of the main cases 234
Background to port privatisation 236
What are the projects? 239
Qingdao Port International Co Ltd, China 240
Background 240
The company 240
The fundraising 242
Risks 243
Post transaction developments 243
Mundra Port and Special Economic Zone, India 244
Background 244
The company 245
The fundraising 246
Risks 246
Post transaction developments 247
New South Wales Ports privatisation: Australia 247
Background 247
The companies 249
Port Kembla 249
Port Botany 249
The fundraising 250
Risks 253
Post transaction developments 254
Reflections on the port cases 254
18 Final reflections 256
Bibliography 257
ix